The GST reform of 2017 marked the beginning of a new era in India’s indirect tax structure. Not only has this regime simplified the taxation procedure by bringing all the indirect taxes under a single category, but has also brought some uniformity across the nation. In the three years following the announcement of the “One nation one tax” regime, the SMEs and start-ups have enjoyed the GST registration benefits.
If you are the owner of a small business or a start-up, GST registration will give you the following benefits:
GST Benefits – Advantages and Disadvantages of GST
Advantages of GST
• Combined VAT and service tax filing
Under the GST regime, start-ups which pay service tax and VAT separately can now file the two in one go. Before 2017, these businesses had to comply with both service tax and VAT guidelines. GST registration eliminates the distinction between goods and services, and invoicing becomes easier under a single rate.
• Simpler taxation process
With GST registration, you will be able to spend less time on tax compliances. GST brings the various tax compliances under excise, service tax, CST, VAT etc. under one umbrella, making the tax paying process much simpler and less time-consuming. Besides that, GST reduces the burden of tax compliance for smaller businesses.
Additional Read: Things about GST You Should Know
• Reduction in transportation costs and logistics
With the incidence of GST, there will be a reduction in border checks which will reduce transportation time considerably. The interstate movement of goods is now easier, reducing transportation and logistics costs. After the implementation of GST, start-ups or small businesses have the time to improve on their business and explore new opportunities and the demand for business loans have considerably increased.
• No more cascading taxes
GST has divided all kinds of indirect taxes under two major categories; central taxes and state taxes. Because of this system, the hassle of “tax on tax” has been eliminated. This will give small businesses more direct savings.
If you own a start-up, along with these tax savings, you can also apply for loans at low business loan interest rates to acquire funds for exploring new opportunities.
• Starting a business has become easier
Another major advantage of GST registration for SMEs is that new companies will not have to abide by different tax rules in different states while doing business across state borders. The incidence of GST has enabled a centralized registration, which will not only ease the process of starting a new business but also eliminate the high procedural fees needed due to the tax guidelines in different states.
• Even unorganised sectors will be regulated under GST:
Various unorganized sectors like textile and construction had been grappling with poor regulation and accountability before GST roll out. But under GST, the provisions for availing of input credit only after the supplier has accepted the sum, including provisions for online payments and compliances.
Disadvantages of GST
• Increased operational costs:
Under GST, a lot of tax laws have been modified and require professional expertise to remain compliant. As a result, businesses have been adding tax professionals to their team. Many have had to update their accounting and books in line with the latest GST-compliant software. This is a costly software and will require proper training for implementation. All of this has added to the operational expense.
• SMEs have to bear a higher tax burden:
Pre-GST excise duty was only levied on businesses with a turnover of Rs. 1.5 crore and more. But under GST, any business with a turnover exceeding Rs. 20 lakhs is liable to pay GST.
Additional Read: Growth Opportunities & Impact of GST on Small Businesses
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